Is Your Homeowner’s Insurance Company Acting Questionably?
We recently submitted a homeowner’s insurance claim for smoke and ash damage that displaced us from our home. The insurance company provided a $15,000 advance specifically for “loss of use” to cover our hotel stays and meals while we are away. They also sent a “trusted vendor” initially to evaluate the damage and prepare a report, which estimated that it would cost $35,000 to clean the entirety of the house and the detached garage, plus replace the contaminated insulation in the attic.
However, after receiving this report, the insurance company sent their own adjuster for a second inspection, who claimed that the repairs would only amount to $8,000. This figure significantly contradicts both the vendor’s estimate and quotes we’ve obtained from other contractors. Following the adjuster’s assessment, the insurance company issued us an additional check for $8,000.
Now we have some questions:
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The insurance company seems to acknowledge that their adjuster’s valuation is low, yet they insist that to receive more than the $8,000, we must actually complete the repairs with a vendor. Is this a fair practice? It feels unjust for them to artificially reduce the claim value to limit their upfront payout. We have extended Replacement Cost Value (RCV) coverage, and the adjuster’s report indicates zero depreciation for the recommended services.
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We’ve been informed that any amount we don’t spend from the initial $15,000 advance for loss of use will be reallocated to cover dwelling or personal property losses. This means that even if the damage to our home is determined to be greater than $8,000, any unspent funds from the loss of use advance will be used to cover those dwelling losses. Is this something they are legally allowed to do?
It sounds like you’re dealing with a frustrating situation. Here are some insights regarding your questions:
(1) Can the insurance company require you to have the work done to receive the full amount?
Insurance companies often have specific procedures and requirements for how claims are handled, including how funds are disbursed. However, it does seem unusual for them to require you to complete the work before they will pay the full amount owed under the policy, especially if you have replacement cost value (RCV) coverage with 0% depreciation. Typically, RCV allows for full reimbursement without considering depreciation, but you may still need to provide documentation to back up your claim. It would be advisable to review the terms of your policy closely and possibly consult a legal expert or a public adjuster to advocate for you. They can help ensure you receive the full value of your claim based on the initial assessment and your policy terms.
(2) Can they reallocate the loss of use advance to cover dwelling losses?
This approach also seems quite questionable based on standard practices. Loss of use coverage is typically designed to cover additional living expenses incurred while your home is uninhabitable, and it should not be reallocated to cover dwelling damage unless that is explicitly stated in your policy. You might want to review your policy terms concerning loss of use coverage and consult with a legal advisor or insurance expert to clarify your rights. They can help you understand whether the insurance company is acting within their legal rights and what steps you can take to contest their decision.
In both instances, documentation is key—keep records of all communications with the insurance company, assessments made by different vendors, and any other relevant documentation. This will help bolster your case as you pursue a fair resolution.